The International Finance Corporation’s Program for Eastern Indonesia Small and Medium-sized Enterprise Development, or PENSA, and Swisscontact today joined forces to help East Java’s smaller businesses obtain the finance they need.
PENSA and Swisscontact opened a pilot project named PEAC BROMO in Surabaya to support the effort. PEAC BROMO draws its name from Mount Bromo in the East Java landscape, while emphasizing the vision of promoting enterprises’ access to credit, or PEAC. It will help businesses gain access to finance by establishing a sustainable commercial enterprise that will encourage business development service providers to work with financial institutions such as commercial banks and community banks, or Bank Perkreditan Rakyat, BPR.
Today, most bank finance in Indonesia provides working capital rather than supporting long-term investment. Most bank loans are also directed to large businesses, or rather dynamic and rapidly growing smaller businesses that are positioned to contribute more to economic growth.
“PEAC BROMO will enhance smaller business lending in East Java by improving linkages between the island’s banks and business community. It will work to strengthen business development service providers through training, the exchange of knowledge, and commodities,” said IFC PENSA Access to Finance Program Manager Terry Wyer.
“The facility also aims to improve service provider skills in financial matters and understanding of banking products, provide services to banks related to SME lending, and develop networks between banks and service providers to improve their quality,” said Swisscontact’s Indonesia Resident Representative Peter Bissegger.
The official opening was carried out by the Governor of East Java, Imam Utomo.
PEAC BROMO is supported by Bank Indonesia, regional and local banks, the government of East Java, IFC PENSA and Swisscontact, who will each have a seat on the supervisory board. The board will offer technical assistance and capital investment to support this unit until it becomes sustainable. The board will also act as an independent certification body to verify those business development service providers that have undergone specified training courses making them competent and ready to support SMEs in getting loans and using those funds effectively. The Indonesian BDS Association and the Jawa Pos Group will be directly involved in day-to-day operations through seats on the board of commissionaires. PEAC BROMO plans to train 30 BDSPs in the first year.
Before developing the facility, IFC PENSA and Swisscontact searched for local partners in East Java to collaborate in developing, implementing and operating the institution. To find a partner with the same vision, mission and offering competence, IFC PENSA and Swisscontact conducted transparent selection processes and discussions with experts. Starting with an orientation seminar on September 2, 2004, attended by 100 people, the process concluded with five short-listed BDSPs to present their business plans in front of a panel of jury representing Bank Indonesia, a BDSP expert, Perbanas, IFC PENSA and Swisscontact on October 22, 2004. The winner for the Banking & Finance Consulting is a consortium between Indonesian BDS Association and Jawa Pos SME Center.
IFC-PENSA, is one of IFC’s technical assistance facilities supporting small and medium enterprises. IFC is the private sector arm of the World Bank Group. The PENSA facility has a five-year mandate and has been co-funded by IFC and the governments of Australia, Canada, Japan, Switzerland and The Netherlands, with initial funding commitments of $22 million.
Swiss Foundation for Technical Cooperation, or Swisscontact is a non-profit and politically neutral organization. Under the Small Enterprise Link to Finance, or SELF project, Swisscontact aims to improve access to finance for small businesses in Indonesia.